Ben Davis
FinCap, the private markets investment platform, says some of the market conditions that produced the strongest private fund vintages of the past 25 years have returned, and recommends that investors build their allocations in stages across 2027- 2028 rather than wait for sentiment to recover.
“According to our research, investors should begin diversifying portfolios now through to 2028 across private equity, real estate, infrastructure and credit, with a tilt towards mid sized companies and discounted secondary stakes and limited exposure to segments where capital is most crowded,” says Ben Davis, head of portfolio and investment solutions, FinCap.
“The best time to buy private assets is when few others are buying, and that time is now,” Davis adds. “Exits are slow, fewer funds are raising money, and sellers who need cash are accepting lower prices. The herd mentality may be that private markets are not the place to be in 2027, but those same investors were fully invested in 2020 and 2021, when competition was intense and valuations were high.”
FinCap cites PitchBook data showing 551 US private equity funds closed in 2025, down from 836 in 2021. First time funds fell to 23 in the first half of 2026, compared with an average of about 180 a year from 2021 to 2023. Buyout funds have returned less than 15 per cent of their net asset value (NAV) to investors in each of the past four years, leaving owners who need liquidity to sell to the few buyers with capital.
Historical vintage data supports the case for investing after a reset. Real estate funds that began investing at the 2005 to 2007 peak lost about 3 per cent a year; those that began after the global financial crisis returned about 19 per cent a year.
“We do not expect returns of that size to repeat. Private markets have grown from under US$1 trillion to more than US$17 trillion since 2000, and the entry prices of that era are not coming back,” Davis says. “This is not a call for a big one year return, but a case for investing steadily over three years, so that each year’s capital buys at that year’s prices and holding for the long term.”
FinCap also names three risks worth watching in 2027. “A sharper interest rate cycle signalled by rising inflation expectations, a recession that cuts earnings before entry prices adjust and exit markets staying closed for longer, could extend the time investors wait for distributions,” says Davis.
“Across the FinCap portfolios, private equity is the largest overweight, with a bias towards the mid market,” he says. “Smaller US companies sold for an average of 7.0 times earnings in the June quarter, compared with 12.5 times for the typical US buyout in 2025.
“We are also overweight real estate, tilted towards value add strategies.US commercial property is 12.8 per cent below its 2022 peak and office is a third below. According to Jefferies Global Secondary Market Review sellers of real estate fund stakes received 68 per cent of NAV in the first half of 2026, the lowest of any private asset class.”
“We remain selective in infrastructure,” Davis says. “The AI build out requires power and data networks, and the International Energy Agency expects data centre electricity use to roughly double by 2030. However, capital is crowding into value add infrastructure, which narrows the opportunity set.”
“In private credit, we favour opportunistic strategies over direct lending, where record inflows are chasing fewer loans,” he adds. “Australian listed credit trusts have traded at discounts of 10 to about 25 per cent to NAV in 2026, and the main US business development company (BDC) index yielded 10.8 per cent at the end of September.”
“We are underweight venture capital as late stage valuations are high. We are taking exposure through secondaries and co investment,” Davis says.
“Active management will continue to play a role in selecting quality private assets. In the 2010s, cheap debt and rising prices were creating new opportunities for investors. Bain & Company now estimates a buyout needs 10 to 12 per cent annual earnings growth to return 2.5 times over five years, up from about 5 per cent. The managers who achieve that, do so by improving the businesses they own.
“Across FinCap’s Helm Portfolios we set a long term mix for each portfolio, adjusted within a range each quarter as prices move, and select the managers who deploy each position. BCA Research advises on asset allocation; the positions and manager selection are based on our own investment research,” Davis says.
Helm Growth holds 53 per cent in private equity, concentrated in mid-sized companies, secondaries and co-investment. It also holds 15 per cent in infrastructure (after adding two funds in September and October), 14 per cent in real estate and 8 per cent in venture capital.
Helm Income draws its returns mainly from credit. It holds about 16 per cent in flexible and opportunistic credit, including Australian listed credit trusts and a fund that invests in US listed BDCs, alongside 10 per cent in real estate and 9 per cent in infrastructure.
“As we head into the new year, no single market or manager should decide the return outcome for private market investments,” Davis says. “Private equity is the clearest opportunity, but real estate, infrastructure and private credit each respond to different drivers, from company earnings to rents, inflation and interest rates. Holding all four across high quality managers is how investors should build resilience into their portfolios.”
